WellCare Health Plans (WCG) Take-Out Likely, PT Raised to $170 at Leerink Partners

Leerink Partners raised its price target on WellCare Health Plans (NYSE: WCG) to $170.00 (from $160.00) while maintaining a Outperform rating.

Analyst Dr. Ana Gupte comments (emphasis ours) "While guidance was merely re-affirmed, this Management team has a history of substantial positive revisions. We see the $6 to $6.25 as guidance as conservative and are above consensus for 2017 at $6.50 with an expectation of $7 to $7.25 post UAM close with a likely raise in 2Q. For 2018, we raise our EPS by 20c to reflect the beat to an above consensus view of $7.50. Post UAM and continued margin expansion in Medicare Advantage we expect a bull case of as much as $8.50 while Corporate tax reform can offer as much as 15% upside. WCG is largely insulated from the downside of Repeal and Replace given it had no exposure to Public Exchanges while its exposure to Medicaid expansion is only 7% at 200 K lives in KY where rates and margins compressed in 2015. The favorable post-election landscape for MA should drive growth and multiple expansion at a third of its revenue from MA after UAM close. We see take-out as likely after the mega deals break with AET as the most likely buyer followed by CI or ANTM."

More specifically the analyst says "We see take-out as likely after the mega deals break with AET as the most likely buyer followed by CI or ANTM. AET has the least anti-trust issues while the issues posed for a CI are most likely addressable, through divestiture."

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